More Alphabet Soup

If ever there was need for an financial journalist to sort things out, it’s now. Market enthusiasts have received quite an education in the alphabet soup of the finanical markets of late – CDOs, SIVs, & CMOs have given the CFAs and the MBAs of the world something to worry about. And now your can add another four-letters to your growing glossary of terms: MBIA.

MBIA – the largest insurer of banks – is one of several companies subject to increased scrutiny by Moody’s Investor’s and Standard & Poor’s rating services. MBIA may soon lose its AAA rating. This could be bad news. If MBIA and other such entities are seen to be faltering, then the markets will get another blow not priced into current market valuations.

It’s hard to say how big the MBIA thing is. The facts are still forthcoming and we don’t know what we don’t know. If it comes to naught, expect a dramatic bounce from financials. Woe be to the shorts on that day. The prudent trader will heed the warning on both sides of the market. It’s too soon to say anything with certainty. Such is the case of alphabet confusion.